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... 1 Why is the strategic review important for SAB? ... 5 Increasing globalisation 3
3 SAB- Company Assessment
3. ... 2 Alternative Growth Strategies of SAB 4
3. ... 2 Stakeholders of SAB 4
3.3 Strength and Weaknesses of SAB 5
4 Beer Industry Landscape
4. ... 1 Summary of industry attractiveness 5
4. ... 3 Opportunities and Threats of the Beer Industry 6
5 Scenarios for the Beer Industry and SAB
6 Strategic Options for SAB
6. ... SAB Value-chain activities 14
Appendix 2. ... Beer industry (STEEPLE) 18
Appendix 7. SAB/ Miller post merger SWOT 19
Appendix 8. ... Competitors Response Profile 20
9 References
10 Bibliography
1 Executive Summary
The following report reviews the current strategic position of SAB and outlines a contingency plan with the preferred options for each possible future scenarios.
SAB realises that it needs to look oversees to enhance margins, diversify geographically its earning streams and reduce the risk of hostile takeovers.
The report appraises the strength and weaknesses of SAB based on its strategic position, value-chain activities and stakeholder power.
The report then proceeds to establish the state of the external environment, highlighting the attractiveness of the industry using STEEPLE analysis and an extended version of the Porter’s five forces model. ...
From the industry assessment six major scenarios effecting the beer industry and/or SAB can be identified; including developing a global brand, cross-boarder mergers, emerging markets as profit pools, intensified competition in mature markets, (SAB only – hard currency earnings and declining FDI in Africa). ... In the medium and long terms, emerging market development and active participation in the ongoing industry consolidation is recommended. ...
2 Introduction
The purpose of this report is to analyse the strategic position of SAB. ... To critically access the strategy development and current position of SAB within the external and internal environment
2. ... 1 Why is the strategic review important for SAB?
SAB is the forth largest emerging market brewer by volume, associated with South Africa (98% share). ... Liquor legislation may eases as a result of a court judgement in November 1999, which may cost SAB it’s monopoly over the SA distribution network (SA Breweries, Defence or Not? ... Therefore, SAB realises the need to look overseas for opportunities to enhance margins, and diversify geographically its earning streams. ... The weakness of the rand against other world currencies has affected SAB’s profit. The source of capital is therefore becoming an increasingly critical issue for SAB in the creation and reproduction of competitive advantage and extension of its operation to translational scale. Aiming to increase its globalisation efforts, SAB shifted its headquarters to London and listed on the London Stock Exchange. ... Loss of confidence in these markets could mean a further dip in share price of SAB, and increase vulnerability to takeovers and other market forces. ... 4 Organisational effectiveness and management
Raising capital in global financial centres requires SAB to be credible and relatively “transparent” in management practices, organisational effectiveness and cost control to ensure increased efficiency and profit as will be expected from the more diverse and demanding shareholder base. ... Due to the lack of international brands in its portfolio, the negative sentiments towards South Africa and the low quality image of SA beer in Europe provides SAB with a great challenge in terms of market and product development.
3 SAB- Company Assessment
3. ... Before 1990’s due to anti-apartheid legislation in Africa SAB market extension was limited to the region. ... When sanctions were lifted, emergent strategies such as Portfolio Extension (mergers and acquisitions) were realised at SAB globally, while it had refocused on its core brewing and hotel businesses. ... SAB has adopted the followings:
Cost Cost leadership through economies of scale.
SAB has not introduced brands from its international portfolio, but instead invested in local partners, which produce law budget brands.
Focus SAB has refocused on it’s core brewing (hotel) activities
Differentiation Knowledge of emerging market economies. ... 2 Alternative Growth Strategies of SAB
To portray alternative corporate growth strategies of SAB, the Ansoff matrix in
Smith (2000) is introduced in Figure 2. ... 3 Strategic Position Development through the Value Chain
Porter’s value-chain model allows us to analyse the specific activities through which SAB can create a competitive advantage (Appendix 1). ... The key value added activities are identified from SAB’s value chain are
• The localization of technical change (Tolentino, 1993). SAB learnt sophisticated process and product technologies from licensing agreements and adopted these to emerging markets
• Value added to distribution strategies of local operations through cost control and relationship marketing. ... 2 Stakeholders of SAB
Stakeholder expectations can have can have a further impact on strategic decisions depending on the power that each group processes as shown in the Shareholder Mapping Matrix in Appendix 2. ... 3 Strength and Weaknesses of SAB
Based on the review of the value chain activities, the stakeholder expectations, the company’s strategy development and current position, we can summarise the key strength and weaknesses of SAB as:
Strength Weaknesses
-Strong company values like social sensibility
-Strong on people management
-Price leadership in emerging markets
-“Local beer to local people” attitude
-Effective distribution system in South Africa and Central and Eastern Europe
-Listed in London SE, FTSE 100
-Localisation of technological change
-Extensive emerging markets knowledge
-Consolidated national industry has doubled its profitability -Limited access to capital
-Rating and revenues influenced by assessment of emerging markets
-FDI and economic growth is highly dependant of government policies
-Operations rely on emerging and Newly Industrialised countries
-Quality produced in Africa has a low rating in developed countries
-Lacking of brand portfolio
-Could lose monopoly over SA distribution system
4 Beer Industry Landscape
“ A horse never runs so fast as when he has other horses to catch up and outspace”
(Ovid, The Art of Love AD. ... The review is fourfold and focuses on industry’s attractiveness, competitor and strategic group analysis and the summary of opportunities and threats of the beer industry. ... to gain a better understanding of the industry context in which SAB operates. The following conclusions can be made regarding the industry’s attractiveness. ... 1 Summary of industry attractiveness
The structure of the highly fragmented beer market is changing, with a number of companies merging in order to obtain economies of scale in technology innovation, R&D, operation, and marketing. ... In developed countries industry growth is slow, falling volumes have intensified competition between existing players as they are trying to maintain market share. ... The industry is an attractive one and it is likely to remain so, despite some increase in the bargaining power of buyers, threat of substitute products in packaging, increasing consumption of other substitutes (e. ...
Although, Porter’s model is an important framework to analyse the industry attractiveness, is it lacking to explain how you can measure the rivalry between firms. However, “measurable” characteristic of the beer industry very much influence the strategic direction of a firm as highlighted in Appendix 3. ... The industry is highly fragmented with a large amount of small and micro breweries at regional levels. ... A full analysis of the major SAB competitors is carried out in
Appendix 5. ... 3 Opportunities and Threats of the Beer Industry
Opportunities Threats
-Growing trend towards cross-border mergers and acquisitions
- Two growth beer markets: emerging market and premium beer
-Opportunities for growth exist in Newly Industrialised Economies (Latin-America and Asia), in the Transition Economies and in the US
-China is one of the fastest growing beer market in the world. ...
-Consolidation of the global industry directly threatens employment
-Nationalism and localism are still strong forces
5 Scenarios for the Beer Industry and SAB
Developing scenarios for the Beer Industry and SAB are based on the identification of non-controllable external factors which are directly or indirectly influence the industry attractiveness and the acquisition of inputs and outputs by SAB. ... ) and the 5-forces model in
Appendix 4, the following scenarios can be identified:
Beer Industry South African Brewery
Developing a Global Brand
-Requires standardisation, R&D and marketing intensive, still no guarantee to succeed
-Emerging markets will not be able to pay price of these brands, still localised
-Majority of customer base in developed markets where there is a move towards premium branding -Pilsner Urquell could be developed into global brand
-Need to invest in product development, R&D and distribution networks in developed countries
-Need to benchmark against world standards in production and distribution
-Customer segmentation required
Industry Consolidation- Cross border Mergers
-Increasing competition is a defining characteristic of the global economy. ... -SAB markets are dominantly local and regional economies
-To compete effectively, SAB need to globalise its operation, it has to stay competitive through creating and sustaining its firm-specific advantages and intangible sources of competitive advantage such as core competences
Emerging Markets the Major Profit Pool for Beer
-FDI and multinationals are increasingly invest to Newly Industrialised Economies (Latin-America and Asia) and Transition Economies
-Level of GDP is lower within these economies therefore price elasticity need to be adjusted to local customer needs.
Approximate Word count = 7156
Approximate Pages = 28.6
(250 words per page double spaced)
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